Downgrade Highlights China Debt Worries

Move by Fitch Is One of Strongest Signals Loan Binge Could Threaten Recovery; Shadow Lending Is an Extra Wild Card

By

Aaron Back

Updated April 10, 2013 4:26 a.m. ET

BEIJING—Fitch Ratings Inc. lowered one of its key ratings on China's government debt, in one of the most prominent warnings to date over a credit buildup in the world's second-largest economy.

The downgrade applies only to China's yuan-denominated debt, which is primarily traded domestically—not the foreign-currency debt that it issues in international financial markets, so it is unlikely to have a big impact on global financial...